Supply chain finance, financial development and profitability of real estate firms in Vietnam

This paper investigates the impact of supply chain finance (SCF) and financial development on profitability of real estate firms in Vietnam over the 2013 - 2017 period. This is the first empirical research examining the impact of financial development on firm profitability.
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Supply chain finance, financial development and profitability of real estate firms in Vietnam Uncertain Supply Chain Management 8 (2020) 37–42 Contents lists available at GrowingScience Uncertain Supply Chain Management homepage: www.GrowingScience.com/uscm Supply chain finance, financial development and profitability of real estate firms in Vietnam Toan Ngoc Buia* a Faculty of Finance and Banking, Industrial University of Ho Chi Minh City (IUH), Vietnam CHRONICLE ABSTRACT Article history: This paper investigates the impact of supply chain finance (SCF) and financial development Received July 28, 2019 on profitability of real estate firms in Vietnam over the 2013 - 2017 period. This is the first Received in revised format empirical research examining the impact of financial development on firm profitability. By August 29, 2019 employing GMM (generalized method of moment), this paper reveals the important role of Accepted September 6 2019 Available online supply chain finance (SCF) and financial development in profitability of real estate firms. September 6 2019 Specifically, firm profitability (P) is influenced negatively by cash conversion cycle (CCC) Keywords: and positively by financial development (FD). In addition, profitability is negatively correlated Supply chain finance with control variable of financial leverage (LEV) and positively associated with control Financial development variable of firm size (SIZE). The findings reveal the role of supply chain finance and financial Profitability development in firm profitability which policymakers as well as managers at real estate firms Real estate can apply suitable methods in order to improve firms’ profits. Vietnam © 2020 by the authors; license Growing Science, Canada. 1. Introduction After the global financial crisis, Vietnam economy made an impressive recovery which has positive significant effects on real estate industry. That brings many opportunities for Vietnam’s real estate companies to extend its market. However, this extension also brings them big challenges, especially to their limited management skills, so it is compulsory to adjust their business operation and management skills, especially to improve capital approach ability in order to expand their financial capacities as well as markets. In specific, participating and completing supply chain finance (SCF) is the most concerned issue of real estate firms because these activities together with improving capital approach ability play vital roles in the process of market expansion. SCF brings companies more opportunities to access to capital (Marak & Pillai, 2019). The fact that SCF works ineffectively and capital approach ability is limited will increase risks or interruption in the operation of supply chain (Raddatz, 2010). Furthermore, SCF also brings companies more profits and efficiency (Lekkakos & Serrano, 2016). Especially, after an economic crisis, credit sources and trade credits from suppliers become constrained so it is even imperative for Vietnam economy which has just experienced that difficulty period from 2011 to 2012 to complete SCF and raise capital approach ability. Moreover, supply chain finance allows its participants to reach their targets in cutting capital cost, optimizing working capital as well as boosting profits (Raghavan & Mishra, 2011). Despite its importance, supply chain finance has been a relatively new topic to most empirical studies (Caniato et al., 2016). Meanwhile, most of empirical research on SCF have not used data from financial statements in a wide range of companies, but only surveys or * Corresponding author E-mail address: buingoctoan@iuh.edu.vn (T.N. Bui) © 2020 by the authors; licensee Growing Science. doi: 10.5267/j.uscm.2019.9.001 38 in-depth interviews (Dong et al., 2007). The participation in SCF is not only to optimize companies’ working capital but also to access to medium-term and long-term bank loans. Consequently, national financial development really helps companies improve their capital approach abilities as well as profits. Especially for Vietnam, a developing country with a new stock market, credit source is a key factor in supplying capital for real estate firms. The economic recovery and financial development have been quite optimistic in recent years (Fig. 1). That contributes a lot in raising profits of real estate companies. Fig. 1. Financial development in Vietnam (Source: World Bank) To financial development, most empirical studies are mainly focused on analyzing its role in the economy. Meanwhile, its specific impact on firm profits has not been paid attention yet. Thus, this paper is conducted in the objective of giving empirical evidence on the impact of SCF and financial development on profitability of real estate firms. Its results are expected to help policymakers as well as managers at real estate firms acknowledge the importance of supply chain finance and financial development to firm profitability. 2. Literature review and research hypothesis 2.1. Supply chain finance and firm profitability Supply chain finance (SCF) has been bro ...